Muthoot Finance Limited, India's leading gold loan non-banking financial company (NBFC), has announced its financial results for the third quarter of the current fiscal year. The company reported a significant jump in its standalone net profit, which nearly doubled to ₹2,656 crore, compared to ₹1,363 crore in the same period last year. Despite this 95% growth in profitability, the company's stock faced intense selling pressure in the equity markets. On Friday, Muthoot Finance shares plummeted by as much as 14% on the Bombay Stock Exchange (BSE), hitting an intraday low of ₹3,577.
Detailed Financial Performance for Q3
The company's total income for the quarter ended December 2024 rose by 64% year-on-year to reach ₹7,263 crore. According to the financial statements, the sharp increase in profit was supported by a 47% reduction in provisions and an additional gain of ₹111 crore. While the top-line and bottom-line figures showed substantial growth, market observers pointed out a slight softening in profit margins on a quarter-on-quarter basis. This compression in margins, coupled with a general bearish sentiment in the broader market, contributed to the sharp decline in the share price following the earnings announcement.
Significant Growth in Assets Under Management
A key highlight of the quarterly report was the strong growth in Assets Under Management (AUM). 48 lakh crore. 40 lakh crore. The total loan AUM increased by ₹38,905 crore, representing a 36% growth over the previous year. In the December quarter alone, the gold loan AUM expanded by ₹14,740 crore, marking a sequential growth of approximately 12%. This indicates a sustained demand for gold-backed credit despite fluctuating bullion prices.
Gold Loan Segment and Operational Metrics
The gold loan segment remains the primary driver of the company's business model. The year-on-year increase in gold loan AUM was recorded at ₹36,702 crore. George Alexander Muthoot, Managing Director of Muthoot Finance, stated that the business is receiving strong support from solid demand in the gold loan segment and increased regulatory clarity. However, certain operational metrics drew scrutiny from analysts, including a slight decrease in the Loan-to-Value (LTV) ratio and a marginal decline in gold tonnage. These metrics are often viewed as indicators of the underlying health of the gold loan portfolio.
Revised Growth Guidance for Fiscal Year 2026
In a move reflecting confidence in future operations, the management has Importantly upgraded its growth outlook. The Managing Director announced that the company has increased its annual growth guidance for the financial year 2025-26 (FY26) to a range of 44-45%, up from the earlier projection of 30-35%. The management believes that the combination of strong gold prices, a healthy LTV buffer, and eased regulations for opening new branches will provide the necessary tailwinds for AUM growth. Also, operating expenses and credit costs have remained within expected limits during the reported quarter.
Market Dynamics and Brokerage Observations
The 14% drop in share price occurred amidst a broader market correction where major indices and IT stocks were trading in the red. Global brokerage firm Jefferies has maintained a 'Buy' rating on the stock with a target price of ₹4,750. The brokerage noted that while Q3 AUM growth was impressive at 51% YoY, the slight moderation in margins and tonnage were points of observation. Analysts suggest that the market's reaction might be a result of profit booking and concerns over the sustainability of high growth rates in an evolving regulatory environment for NBFCs.
Disclaimer
This news report is for informational purposes only and doesn't constitute investment advice. Stock market investments are subject to market risks. Consult a certified financial advisor before making any investment decisions.